The UK’s Magna Carta 2.0: Good for freedom, good for growth

The original Magna Carta was a charter agreed to by King John of England in 1215. And it has just celebrated its 801st anniversary - no, I wasn't there.

But that charter has become part of an important, iconic, political myth. The deal between an unpopular king and rebellious barons marked the beginning of individual English freedoms, personal liberties, and due-process protection of individuals under the law. Magna Carta has also been cited as providing the essential foundation for the contemporary powers of Parliament and legal principles such as habeas corpus.

That's the mythology, and it's an important one.

So while I understand that describing the Brexit victory as Magna Carta 2.0 is inexact, I think it makes a key point: Britain will regain its political freedom, its autonomous self-government, and its independence from an European Union that is spinning out of control under the power of establishment elites, unelected and unaccountable socialist bureaucrats, and a court that is increasingly making legal decisions that replace Britain's powerful common law.

The EU's tax and regulatory policies, climate-change and welfare spending, and free immigration even in wartime are gradually ruining Europe. That's why I believe Brexit is good for British freedom, political autonomy, and the survival of democratic capitalism.

The business elites told British voters that leaving the EU would lead to economic catastrophe. Well, in England, Main Street defeated the establishment elites by sending a populist message.

And there need be no economic catastrophe. The EU needs Britain more than Britain needs the EU. The London Stock Exchange is one of the most powerful financial centers in the world. Frankfurt will never replace it.

Trade is the key to the economic outlook in Britain and the EU. Many corporate chieftains joined large bank chief executives and the fear-mongering International Monetary Fund to suggest that the EU will deal harshly with Britain if it leaves and stop all trade. That's mutually assured destruction – MAD. A tariff-driven trade war would destroy both power centers.

Not only does the EU need Britain's financial capabilities, Britain itself is major importer of EU goods and services. If sanity prevails, there's no reason why the EU and Britain can't hammer out a free-trade agreement in the two years allotted by the Lisbon Treaty.

And if the EU wants to go with MAD, the whole set-up will burn in flames.

Yes, there's a lot of disagreement about the economic consequences of Brexit. But remember that Britain is still a member of the IMF, the World Bank, G-7, G-20, the WTO, NATO, and so on.

Veteran Wall Street economist Robert Sinche wrote a note to clients in the early evening of the vote that there was a high probability that Brexit would win. He wrote: "most analysts have overestimated the negative impact of a leave vote as the UK has been a marginal member of the EU on/off for many decades." Brave chap. But I agree.

And we should also remember that the Bank of England -- a better operation than the European Central Bank -- will still be in business, as will the British pound sterling.

My advice to investors is to ride out the short-term market volatility, which may last several months, and look instead at the long-term positives of political and economic freedom.

It will now be up to Boris Johnson, the likely new British prime minster, and the Tory party, perhaps with bipartisan help, to negotiate a good trade deal and move more aggressively on the pro-growth path of free-market supply-side policies.

There's already talk about abolishing the 5 percent value added tax on household energy. Good. Taxes need to be reduced across-the-board, heavy regulations need to be rolled back, and government spending needs to be restrained.

This is Britain's opportunity. It's kind of a Thatcher moment.

If you look under the hood of the populist revolt in Britain, and the budding revolts in larger Europe and America, the anger is in good part rooted in the lack of economic, job, and wage growth. Worldwide, growth has been missing. All the major countries have been operating under big-government spending, heavy regulations, and the insane central-bank policies of quantitative easing and zero (now negative) interest rates. It hasn't worked. Middle-income wage earners have had enough.

Plus, wartime immigration policies have been too easy. And the major countries, including America, have not destroyed ISIS. So this popular revolt is also aimed at national-security failures.

The American election in November may parallel the British story. Barack Obama, who insulted British voters by campaigning in London against Brexit, is a huge loser. Hillary will suffer from this. Donald Trump will benefit.

So I'll end where I began: Brexit is good for freedom, growth, and Britain. Ride out short-term financial and economic volatility. And watch for a full populist revolt in America this fall.

Commentary by Larry Kudlow, a senior contributor at CNBC and economics editor of the National Review. Follow him on Twitter @Larry_Kudlow.